TOKYO: Japan’s core private-sector machinery orders rose a seasonally adjusted 8.3 percent in June from May, rebounding from two straight month of decline, the government said Wednesday, led by large orders for transport equipment including rail cars. The orders, widely viewed as a leading indicator of future capital spending, totaled ¥849.8 billion ($8.4 billion), the Cabinet Office said. The gain was stronger than the average market forecast of a roughly 3.5 percent increase.
Despite the sharp gain, the government left unchanged its basic assessment of core machinery orders, saying they are now “at a standstill,” after downgrading the view the previous month, taking into account steep declines in the past two months.
The orders for the April to June period plunged 9.2 percent from the previous quarter, falling far beyond the government forecast of a 3.5 percent contraction. The Cabinet Office estimates core orders will expand 5.2 percent in the three months through September. Takeshi Minami, chief economist at the Norinchukin Research Institute, said the orders appear to have been bottoming out and are likely to move sideways for a while.
The orders are likely to be supported by infrastructure demand for the 2020 Tokyo Olympics and inbound tourist demand. “But they are expected to lack strength due to the negative impact of the yen’s appreciation and weak private consumption,” Minami said. The figures are closely watched as Prime Minister Shinzo Abe’s government sees business investment, which accounts for some 15 percent of Japan’s gross domestic product, as a pillar of economic growth.
The government’s latest economic stimulus measures worth over ¥28 trillion called for capital investment by the private sector to revitalize the domestic economy and pull Japan out of deflation. Minami said the government’s stimulus steps are likely to help machinery orders to pick up from the next year, but the effects are largely limited to public investment. Orders from the manufacturing sector jumped 17.7 percent to ¥366.6 billion for the first gain in three months, lifted by orders from the transport equipment and production machinery industries.
Those from the nonmanufacturing sector increased 2.1 percent to ¥483.8 billion for the first rise in four months, led by large orders from the transport and mail service sector. Total orders, also including those from the domestic public sector and abroad, surged 10.1 percent to ¥2.21 trillion. Overseas demand for Japanese machinery, an indicator of future exports, gained 10.8 percent to ¥820.5 billion.
